Why Energy Costs are Rising in the UK

Energy Costs Continue to Rise in The UK

Many people are left in disbelief as yet another energy price rise is announced and so soon after the last one. It is more important now than ever before that all gas and electricity consumers have a choice about where to buy their energy supply, and the means to compare electricity prices and gas prices to make sure they are getting the best deal. The price comparison websites give the consumer that choice. But why are energy prices rising year on year?

Wholesale Price

The biggest factor in determining the cost of our energy and one that actually fluctuates the most, is the global energy wholesale price. Energy bills in the UK began to rise exponentially from 2005 onwards when in that year our production of gas topped our ability to produce it ourselves and it was necessary to start importing. The wholesale price makes up around half of our energy bill. The rest is made up from distribution costs and VAT. In addition we have a requirement to lower our CO2 emissions and adopt green energy

Maintenance of Distribution Network

This is really about the condition of the infrastructure that delivers the energy we need into the home. The network is in a constant state of maintenance and upgrade in order to meet ever increasing demand for gas and electricity as our homes support an ever increasing number of appliances, devices and gadgets.

Environmental Targets

There have been a number of targets set to reduce CO2 emissions throughout Europe and the rest of the world. In order to adopt and meet these targets it is estimated that it will cost the UK around £200 billion to meet these targets in terms of investment in new technology, infrastructure development, and securing our supply. It is expected that the consumer will meet this cost through higher energy bills

Government Taxation

VAT is added to the cost of energy which means that regardless of your financial situation you have to pay tax on your energy. Perhaps this is unfair because VAT is not a means tested tax. The person who has been made unemployed and is struggling to bring up a family will pay the same rate as anyone else. Of course the higher your demand for energy which is often determined by the size of your family, the more tax you will pay.

Worldwide Factors.

Gas and electricity prices are inextricably linked to oil prices which in turn are affected by world events. It has been a decade of disasters with many of them having an effect on oil prices. The global financial crisis, natural disasters like the tsunami in Japan which led to the closure of nuclear power plants, and many other factors have all been seen to contribute to higher energy prices in the UK.

The immediate future is not looking good for energy prices as the world now has to start to shift towards cleaner energy production, renewable energy sources and low carbon emissions. Changing the way we produce energy is not going to come cheap and over the next two decades or more it is the consumer who will bear the brunt of the financial implications.

The only thing we have at our disposal to combat rising prices is to make sure that our homes are energy efficient, our appliances are energy efficient and that we are disciplined in the way we use them. One other thing we can do is to constantly review our suppliers to compare electricity prices and compare gas prices to make sure that we are obtaining the cheapest per unit price.